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Low interest rates, low vacancy rates and tight supply are a cue to look at buying a building for your business, according to the Bank of Montreal.

“Now may be a particularly good time for businesses to invest in commercial property for their own use,” said Steve Murphy, senior vice-president of commercial and treasury management at BMO. “There is strong demand for these properties by users, who are often able to lease out part of the property for additional rental income.”

BMO says overall the real estate market continues to show signs of strength and that will likely continue to in the face of low interest rates over the medium term.

Earl Sweet, senior economist and managing director at BMO Capital Markets, said the market is attractive to investors for several reasons.

He notes supply is limited, vacancy rates are lower than historical norms across segments in many cities and risk-averse operations have helped to improve balance sheet performance of developers, construction firms and realtors.

“After a severe and protracted market downturn in the 1990s, the commercial real estate industry in Canada has been characterized by cautious development and prudent lending practices,” said Mr. Sweet.

“Higher occupancy, spurred by steady growth in employment, manufacturing, wholesaling and retailing, is reducing office, industrial and retail vacancies, while lease rates are edging upward. Meanwhile, large U.S. retailers are targeting what they view as the underserved Canadian market for expansion.”

He expects the market to grow at a more “tempered pace” this year and next as Canada’s economic growth eases to 2%.

“Furthermore, the still-unresolved Eurozone crisis and slowing momentum in the United States and several major emerging markets will continue to weigh on investors’ risk appetite and adversely affect the industry in the short run,” said Mr. Sweet.

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